2025 (3) TMI 200 - AT - Service Tax

Refund of the unutilized CENVAT credit - rejection on the grounds that the services rendered by the appellants are Intermediary Services in nature and therefore cannot be treated as Export of Services - whether the appellants are appellants are intermediaries as far as the services rendered to M/s Air BNB Ireland are concerned? - HELD THAT - The authorities below have not interpreted the clauses of the agreements and the facts of the case correctly. The terms of the agreements give an unmissable understanding that Only the main service i.e. promotional and marketing services is being provided by the Appellant and there is no auxiliary service is involved; the compensation to the appellant is on cost plus markup basis; appellant is an independent contractor of Airbnb Ireland; there is no agent-principal relationship; appellant may have entered in to subcontracts for the provision of service agreement will be between subcontractor and the Appellant and the responsibility will be on the Appellant; the Appellant raises bills on Air BNB Ireland and not on their Customers. The appellant has no contract with the customers of Airbnb Ireland. The fact that the appellant has subcontracted does not make them an intermediary as per CBIC Circular dated 20.09.2021. It was held in M/s Blackrock Services India Pvt Ltd 2022 (8) TMI 874 - CESTAT CHANDIGARH following the decision in JFE Steel India Pvt Ltd 2020 (3) TMI 1342 - CESTAT CHANDIGARH that if the case of Revenue is that the activities undertaken by the appellants in present case is not amounting to Export of Service then the proceedings need to be initiated against the appellant for demanding the service tax in respect of the taxable services provided by the appellant. In the present case no such proceedings demanding the Service Tax on these taxable services provided by the appellant have been initiated in terms of Section 73 of the Finance Act 1994. By not initiating any such proceedings Revenue itself has allowed these taxable services provided as Export of Services. Having done so they cannot in a proceeding under Rule 5 for refund of accumulated credit take the contrary stand and deny refund treating the services provided not to be export of services. Conclusion - The appellant s services were not intermediary in nature and thus qualified as export services. Consequently the appellant was entitled to the refund of the unutilized CENVAT credit. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Appellate Tribunal was whether the Promotional and Marketing Support Services provided by the appellant, M/s Airbnb India Pvt. Ltd., to its overseas entity, M/s Airbnb Ireland, qualify as exports or whether they are classified as Intermediary Services. This determination impacts the eligibility for a refund claim of unutilized CENVAT credit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Classification of Services as Export or Intermediary Services

- Relevant Legal Framework and Precedents: The core legal framework involves the definition of "Intermediary" under Section 2(f) of the Place of Provision of Services Rules, 2012, which describes an intermediary as a broker, agent, or any person who arranges or facilitates a provision of a service between two or more persons but does not include a person who provides the main service on his account. The Tribunal also considered CBIC Circular No. 159/15/2021 and relevant case law, including Genpact India Pvt. Ltd. and Black Rock Services India Pvt. Ltd.

- Court's Interpretation and Reasoning: The Tribunal found that the appellant provided promotional and marketing services on a principal-to-principal basis, as evidenced by the Master Service Agreement. The agreement specified that the appellant acted as an independent contractor, not as an agent or intermediary. The Tribunal emphasized that the appellant's activities did not involve facilitating services between Airbnb Ireland and third parties, but rather providing services directly to Airbnb Ireland.

- Key Evidence and Findings: The Tribunal noted that the appellant's remuneration was on a cost-plus markup basis, indicating an arm's length transaction. The Tribunal also considered the absence of a tripartite agreement and the lack of authority for the appellant to bind Airbnb Ireland or its users to any third party.

- Application of Law to Facts: The Tribunal applied the legal definition of "Intermediary" and concluded that the appellant did not meet the criteria, as the services were provided on its own account and not as a facilitator between Airbnb Ireland and its clients. The Tribunal also referenced CBIC Circulars and previous judicial decisions to support this conclusion.

- Treatment of Competing Arguments: The Tribunal addressed the Revenue's argument that the appellant acted as an intermediary due to its interaction with Airbnb Ireland's clients. The Tribunal found this argument unsubstantiated, as the appellant did not have any contractual relationship with the clients and the services were provided to Airbnb Ireland directly.

- Conclusions: The Tribunal concluded that the services provided by the appellant were not intermediary services but rather qualified as exports, entitling the appellant to a refund of the unutilized CENVAT credit.

3. SIGNIFICANT HOLDINGS

- Core Principles Established: The Tribunal established that for a service to be classified as intermediary, there must be a principal-agent relationship, involvement in arranging or facilitating services between two parties, and the service provider must not perform the main service on its own account. The Tribunal reiterated that the mere outsourcing or subcontracting of services does not automatically classify a service provider as an intermediary.

- Final Determinations on Each Issue: The Tribunal determined that the appellant's services were not intermediary in nature and thus qualified as export services. Consequently, the appellant was entitled to the refund of the unutilized CENVAT credit.

- Verbatim Quotes of Crucial Legal Reasoning: The Tribunal emphasized that "the terms of the agreements give an unmissable understanding that only the main service i.e., promotional and marketing services is being provided by the Appellant and there is no auxiliary service involved; the compensation to the appellant is on a cost-plus markup basis; appellant is an independent contractor of Airbnb Ireland; there is no agent-principal relationship."

In conclusion, the Tribunal allowed the appeal, granting the appellant the refund of the unutilized CENVAT credit, with consequential relief as per law.

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